Proceedings of The First International Conference on Financial Forensics and Fraud, ICFF, 13-14 August 2019, Bali, Indonesia

Research Article

The Effect of Material Weakness Disclosure on Investment Judgment

Download187 downloads
  • @INPROCEEDINGS{10.4108/eai.13-8-2019.2294389,
        author={Luciana Spica Almilia and Nurul Hasanah Uswati Dewi and Putri  Wulanditya},
        title={The Effect of Material Weakness Disclosure on Investment Judgment},
        proceedings={Proceedings of The First International Conference on Financial Forensics and Fraud, ICFF, 13-14 August 2019, Bali, Indonesia},
        publisher={EAI},
        proceedings_a={ICFF},
        year={2020},
        month={5},
        keywords={material weakness investment judgment entity level material weakness account-specific material weakness},
        doi={10.4108/eai.13-8-2019.2294389}
    }
    
  • Luciana Spica Almilia
    Nurul Hasanah Uswati Dewi
    Putri Wulanditya
    Year: 2020
    The Effect of Material Weakness Disclosure on Investment Judgment
    ICFF
    EAI
    DOI: 10.4108/eai.13-8-2019.2294389
Luciana Spica Almilia1,*, Nurul Hasanah Uswati Dewi1, Putri Wulanditya1
  • 1: STIE PERBANAS Surabaya
*Contact email: lucy@perbanas.ac.id

Abstract

In Indonesia, financial information is information that is most needed by investors or shareholders. One form of financial information needed by investors is information about the company’s ability to generate profits. Based on this information show that the role of information on internal control is not important in investment decision making. This paper examine that nonprofessional investors make inferences about both audit-related and non-audited-related risk rom material weakness disclosures. This research uses experimental method (Within Subject). The participant were undergraduate students in private university. Participant were asked to evaluate attractiveness of a hypothetical company. To manipulate the type of material weakness, Participant give 2 type of material weakness include the entity-level material weakness and the account-specific material weakness. The results of this study partial supported that there is different response when the participant receive include the entity-level material weakness and the account-specific material weakness. Our results show that the apparent direct effect between the type of material weakness and financial reporting risk is mediated by both non-audited-related and audit-related risks.